Chapter 7 - Customer Accounts Flashcards
All new accounts must be accepted and signed by a principal by-
I’m writing for the form before or promptly after the first trade is executed
How does a principal accept an account?
By signing the new account card. The vast majority are done electronically
What does the predispute clause require?
It requires that any dispute be spelled in binding arbitration, and include disclosures are final and binding, findings are not based on legal reasonings, parties are waiving right to a jury trial, customer must be provided with copy and must verify receipt with a signature, minority of arbitration panel is affiliated with the securities industry,
Copies of customer singed documents must be sent within how many days to the customer?
Within 30 days Of account opening or with the next statement
How often most farms reconfirm the customers information?
No later than 36 months from the time the information was last sent to the customer
Are you able to open accounts for customers who do not disclose financial information?
Yes, you may still open an account if there is reason to believe that the customer can afford to maintain the account.
Where can Security be held
Transfer and ship, transfer and hold and say keeping, hold and street name
What is transferring ship?
Securities are transferred and shipped in the customers name and the certificates will be sent to the customers address of record
What is transfer and Hold in safekeeping?
Securities are transferred and held and save keeping, registered in the customers name, and help by the brokerage firm. The broker dealer may charge a fee. Customers now elect to hold in DRS, or book entry form.
What is hold in street name?
Securities are registered in the name of the brokerage firm as the nominal owner of the securities in the customer is the beneficial owner. Most securities are held in this manner to make transfer of ownership easier.
How long can a firm hold customer statements?
If traveling within the United States, for up to two months. If traveling outside of the United States, up to three months. If the customer states a valid reason and submit a written request, the broker dealer may hold mail up to six months. If a customer is in the military he will be deployed for an extended period of time, he should open a military PO Box to receive statements and confirmations
What type of interest do parties in a JTWROS agreement have?
Both parties on the account have an equal and undivided interest in the assets
In a joint tenants in common, what happens to the assets if one party dies?
The assets of the tenant who died becomes the property of the decedents estate. It allows the assets to be divided and equally. Securities must be signed by all parties.
If an agent is notified of the death of a customer, what are the next steps?
The agent must immediately cancel all open orders and mark the account is deceased. The representative must then await instructions from the executor or administrator of the estate.
What does an agent need in order to sell or transfer assets from the estate of the deceased?
Letters testamentary, affidavit of domicile, inheritance tax waivers, or certified copy of the death certificate.
What is needed if a corporation wants to purchase securities on margin?
The registered representative must obtain a corporate charter that states that the corporation may purchase securities on margin
How is income from a revocable trust taxed?
It is taxed as income to the grantor.
How is income from a trust taxed from an irrevocable trust?
The trust usually pays the taxes as it’s own entity, or the beneficiaries of the trust or tax on the income they receive.
How is income distributed if the trust established is a simple trust?
All income generated by the trust must be distributed to the beneficiaries in the year the income is earned.
What is the term to describe trusts that are established under the terms of a will?
Testamentary trust. All assets placed into a testamentary trust are subject to both estate taxes and probate.
What is a family limited partnership?
It will often used for estate planning, parents may play significant assets into a family limited partnership as a way to transfer their ownership. The parents act as general partners and transfer a limited partnership interest to their children, typically saving money by paying gift taxes, as it will usually be lower than they would have paid without the partnership.
All discretionary authority must be evidenced in writing for which type of account?
Discretionary, custodial, and fiduciary. Any authorization for these is canceled upon the death of the customer.
In a discretionary account, a rep is authorized to do what without consulting the client?
AAA. The asset to be purchased or sold, the amount of the securities to be purchased or sold, or the action to be taken in the account, buy or sell. Time or price do not need discretion.
How long is a limited power of attorney for discretionary accounts good for?
Up to three years.
True or false, customers are bound by the decisions of the rep and discretionary accounts?
True, however the customer may still enter his own orders.
A full power of attorney is most appropriate for?
Fiduciary, such as a trustee, custodian, or guardian. It is usually not given to a rep.
All discretionary accounts must have the proper paperwork, including
Every order entered marked discretionary if it was exercised, must be approved promptly by a principal, a designated principal to review the account, and a record of all transactions.
What is a fiduciary account?
One that is managed by a third-party for the benefit of the account holder.The individual must act as a prudent person, and not speculative. Many states have approval list of securities.
